What happens when someone dies? Probate or Letters of Administration - THE PITFALLS

When somebody passes away, they may or may not have made a Will. In either situation if their Estate is over £5,000 then a Grant of Probate (where there is a Will) or Letters of Administration (when there is no Will) is required to access the funds.  Banks and Building Societies have their own criteria and will allow release of funds without Probate if the Estate is less than a certain amount, usually less than £15,000. However, if the Deceased owned a home, had an interest in the home, and/or had savings over £15,000, a Grant of Probate or Letters of Administration is required.  The process, in theory, to obtain the Grant of Probate or Letters of Administration is quite straightforward, however there are many pitfalls for the Executors. 

Executors (where there is a Will) or Administrators (where there is no Will) are personally liable if the Estate is distributed incorrectly or if they make errors dealing with the administration of the Estate. 

An analogy that we can apply to this situation is - if my brakes on my car were faulty and I attempted to fix them as an untrained mechanic I may do a good job, but if there were issues the consequences could be severe. I therefore would always pay a qualified mechanic to fix my brakes for peace of mind.

Many people attempt to apply for Probate and Letters of Administration themselves, and although this is possible, here are some of the consequences if they are not completely correct without help from a specialist lawyer:

1.  A Will is a Legal Document so the interpretation of the Will is extremely important when distributing the estate. The meaning of the document has to be understood in legal terms to be able to distribute the Will correctly, so it may be misinterpreted if it has been drafted without professional advice.

If a lump sum is payable to a person named in the Will, but that individual has died, this may mean that that lump sum is no longer payable.  If a specific item (like a watch) is written to an individual in a Will, but the deceased person no longer owns the watch, the Executors may be required to purchase another watch to pass on to the Beneficiary depending on the clauses of the Will. It is therefore imperative that the Executors understand the Clauses in the Will, and if there is any reason to doubt the terms of the Will a Court application may need to be made to rectify or to have the Clause interpreted. 

2.  As Executors it is important to know that this is the last Will of the person in question.  The Deceased may have made a later Will which was not with their usual Solicitor. What if you had distributed the estate under the terms of the Old Will? Solicitor searches can be undertaken to check this.

3.  If you cannot locate a Will does this mean that the person who has died has not made one.  Again, if you cannot locate a Will searches should be made to attempt to find whether a Will was made. If you distribute the Estate on the basis that there was no Will, but in the future you find there was one, then the Estate may have been distributed incorrectly and you may be liable for this. You can do various searches and obtain insurance that would protect you if a later Will is found – a solicitor can help you with this.

4.  If the Estate is potentially taxable, i.e Inheritance Tax is payable, then you need to pay the tax within six months of the end of the month in which death occurred.  Afterwards you need to pay the correct amount of Tax within a timescale. You can assess whether the Tax is correct by asking a solicitor to perform searches to check that there are no other assets that you have not taken into account when assessing Inheritance Tax. 

Inheritance Tax is payable at 40% and every £1 over the threshold requires payment of £0.40 to HMRC, therefore it is important to ascertain the correct tax. Interest is payable and penalties can be charged if tax is not paid correctly or in time. 

5.  A person is able to make a claim against the Estate on the basis that they have not been provided for in a Will or under the intestacy, under the Inheritance (Provision for Family & Dependants) Act 1975.  This claim must be made within six months from the date of the grant of representation being issued (unless the Court has granted permission to allow a claim outside of that time limit) and could be served four months thereafter on the Executors.  But what happens if the Executors have already distributed the Estate to a number of Beneficiaries?  In this case the Executor would be liable if they have distributed the estate and not taken into account a potential claim.

6.  A claim could be made contesting a Will on the basis that the Deceased was under duress, i.e. did not have capacity or lacked knowledge and understanding when they made the Will.  These are all issues that an Executor needs to take into account when dealing with the Estate of the Deceased. 

7.  If someone is a Residuary Beneficiary (the person who receives the remaining balance or share of the estate after liabilities, expenses etc.) or is a Beneficiary under Intestacy you may need to consult with the Residuary Beneficiary in relation to the sale of an asset such as the Deceased’s home. If you sell the asset at an undervalue the Beneficiary may raise this as a concern and hold you liable for this.

8.  At the end of a case the Estate Accounts need to be prepared and the Beneficiaries need to sign off the Accounts to ensure fairness.  Final taxes need to be paid, such as Income Tax paid during the Administration of the Estate. Before paying anything to a Beneficiary, it should be checked that they are the correct Beneficiary and they are not bankrupt. If they were bankrupt, then the Trustee in Bankruptcy could have a claim against the money that you have paid to them.

Wills and probate are complex matters and I would always advise that specialist legal advice should be considered when dealing with the distribution of the estate to ensure this is done accurately. 

Emma Fuller is a highly experienced solicitor who works at EHL Solicitors of 44 Churchgate Loughborough Leicestershire LE11 1UE.  Emma specialises in Wills & Probate, Administration of Estates, Elderly Client Work. Emma.fuller@ehlsolicitors.co.uk 01509 212108.